Expert views - Industrial output slips 0.4 pct in Sept

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Last Updated: Mon, Nov 12, 2012 06:35 hrs

India's industrial production fell by 0.4 percent in September from a year earlier, a much weaker-than-expected performance.

Analysts polled by Reuters had expected a rise of 2.8 percent in September output. Revised government figures released on Monday showed August output growth was revised down to 2.3 percent from 2.7 percent.

Manufacturing, which constitutes about 76 percent of industrial production, fell by 1.5 percent from a year earlier, the federal statistics office said.

COMMENTARY

SUJAN HAJRA, CHIEF ECONOMIST, ANAND RATHI SECURITIES, MUMBAI

"This month's factory output data is a negative surprise. We were expecting a rise of 2.5 percent. But monthly industrial production data is volatile, and it is difficult to give a long-term guidance based on one month's number.

"We still maintain our view that there will be some amount of industrial recovery in the second half of the current fiscal year ending in March. For the full year, we expect a rise of 4 percent."

"The trend in growth and inflation is clear; downward pressure on growth and uptrend on inflation into the near term. So, no surprises from the IIP number and it is high time RBI gets into balancing act between growth and inflation."

ANJALI VERMA, ECONOMIST, MF GLOBAL, MUMBAI

"Typically, some kind of inventory buildup also happens in September, so the numbers are all the more disappointing.

"On the other hand, CPI (consumer price inflation) continues to remain high. Going by RBI's guidance, the IIP numbers will now make a strong case for a rate cut to happen in January."

BACKGROUND

- India's manufacturing growth inched up in October from September's 10-month low, supported by a pick up in new orders and an easing of price pressures.

- India's services sector grew at its slowest pace in six months during October as weakness in the United States and Europe hurt orders and forced firms to hire fewer workers, suggesting the worst of the economic slump is not over yet.

- The Reserve Bank of India may ease monetary policy as early as January, Governor Duvvuri Subbarao said, as price pressures ease in Asia's third-largest economy in the first part of next year on the back of slower growth.

- The headline inflation likely accelerated to an 11-month high in October on costlier fuel and food, a headache for the government in a battle with the central bank over spending and high interest rates ahead of state elections.

- The central bank left interest rates on hold last month but cut the cash reserve ratio for banks, defying pressure from the government to lower rates for the first time since April but also indicating it may ease policy in early 2013.